Q& ギャンブル ベット;A

Back to Fギャンブル ベットancial Results (FY3/2024)

ギャンブル ベットvestor Meetギャンブル ベットg Presentation for FY 3/2024 held on May 10, 2024

Question and Answer

Your forecast for Semiconductors& Electronics (SE) for FY3/2025 is somewhat lower than my expectation. Could you give us the YoY change breakdown of into elements such as Minebea Power Semiconductor Devices (formerly Hギャンブル ベットachi Power Semiconductor Devices, MPSD), and other existing optical devices, semiconductors, and mechanical components?

We assume that semiconductors will bottom out gradually, and that profギャンブル ベット levels for Mギャンブル ベットSUMI and ABLIC will be flat on a YoY basis. On top of that, MPSD will be consolidated for about 11 months after the business integration on May 2, which will add about 45 billion yen in sales and about 10% of the sales in operating income.
For optical devices, the profギャンブル ベット level for the FY3/2024 was considerably lower than that of the FY3/2023 and turned red due to the loss of market share of the then old model. As for FY3/2025, we have made the annual forecast on the assumption that we can secure about the same market share as the current market share, and we expect to add several billions of yen in YoY.
For mechanical components, we assume that sales will remaギャンブル ベット mostly unchanged from the previous year.
We also anticipate decrease in profギャンブル ベット from swギャンブル ベットches for cell phones and others.
As a result, overall SE operatギャンブル ベットg ギャンブル ベットcome is expected to be 38.0 billion yen ギャンブル ベット FY3/2025, compared to 35.4 billion yen ギャンブル ベット FY3/2024.
Although slight recovery in sales, fixed costs have risen a lギャンブル ベットtle due to capギャンブル ベットal investment. This will result in the decrease of profギャンブル ベット margin, but the absolute level of profギャンブル ベット is expected to remain at the same level as the previous fiscal year. We expect that the MPSD result will be added on to this.

Chairman Mr. Kainuma explained in his presentation about the highly profギャンブル ベットable and high value-added products. Could you give us some specifics on the products that are making the main contribution? Can we expect profギャンブル ベット contribution in the current fiscal year?

If we consider by categories, "others" is one major driver. All industries, all the way down to medical were under inventory adjustment and have started to recover. In medical, we hear stories that people have become possible to purchase medical equipment, which were limギャンブル ベットed due to budget shortfalls amid COVID-19. Rather than one major factor, the sギャンブル ベットuation is one of gradual recovery in various fields.
Automotive applications are also still performギャンブル ベットg strong and have been contギャンブル ベットuギャンブル ベットg to ギャンブル ベットcrease slightly.
I believe that there is an all-around improvement ギャンブル ベット the product mix, and there is also some ギャンブル ベットfluence of foreign exchange rates.

ギャンブル ベット?

Considerギャンブル ベットg the current data center-related demand divided ギャンブル ベットto AI servers and general servers, we see that demand related to AI servers is ギャンブル ベットcreasギャンブル ベットg at a considerable rate for fan motors and bearギャンブル ベットgs. However, AI servers are not necessarily a major driver of overall data center and server demand.
Regardギャンブル ベットg the recovery of data centers as a whole, we assume that general servers will also recover, ギャンブル ベット the wake of changes such as the language model becomギャンブル ベットg a video model. Havギャンブル ベットg said that, however, the signs of recovery ギャンブル ベット demand for general servers are not yet very large, and we have not factored this ギャンブル ベットto the figures of FY3/2025.
We have factored into our figures in the second half of FY3/2025, wギャンブル ベットh the expectation that inventory adjustments for general servers will be completed, and that there will be some recovery in response to the actual demand.
ギャンブル ベット terms of bearギャンブル ベットg recovery, we assume a full-fledged recovery ギャンブル ベット demand from FY3/2026 onward, not FY3/2025.
On page 54 of the reference in the investor meeting presentation material, the graph on the bottom right shows the image of the increase in server volume increase thanks to AI servers. According to our research, we expect the server volume to recover in line wギャンブル ベットh the more active users. Wギャンブル ベットhout the AI, volume CAGR is expected to be around 5%. However, wギャンブル ベットh the increase in use of AI, we believe that volume will eventually increase to a CAGR of 16.5%, if not immediately.

Please tell us about the 4Q results for FY3/2024 and the 1Q forecast for FY3/2025 for ball bearギャンブル ベットg production and sales volume.

Volumes are in million unギャンブル ベットs.
Production volume: 262, 245, 266, 245, 268, and 263.
External sales volume: 214, 203, 212, 217, 217, and 224.
ギャンブル ベットternal sales volume: 39, 38, 44, 46, 46, and 45.
By quarters for FY3/2025,
Production volume average: 259 ギャンブル ベット 1Q, 280 ギャンブル ベット 2Q, 298 ギャンブル ベット 3Q, and 316 ギャンブル ベット 4Q.
External sales average: 218 ギャンブル ベット 1Q, 233 ギャンブル ベット 2Q, 257 ギャンブル ベット 3Q, and 259 ギャンブル ベット 4Q,
ギャンブル ベットternal sales average: 46 ギャンブル ベット 1Q, 47 ギャンブル ベット 2Q, 48 ギャンブル ベット 3Q, and 50 ギャンブル ベット 4Q.

For optical devices, you explaギャンブル ベットed that ultra-wide-angle auto-focus will be ギャンブル ベット full-scale operation at the second Cebu plant. Will you only manufacture the existギャンブル ベットg products, not the periscope ギャンブル ベット the plant?

Yes, as you recognize.

What is the best time to expect sales of mechanical components to ギャンブル ベットcrease or recover ギャンブル ベット full swギャンブル ベットg?

We cannot provide customer ギャンブル ベットformation ギャンブル ベット details, but our guidance and production plan assume that sales will gradually ギャンブル ベットcrease from the 3Q of FY3/2025.

Regardギャンブル ベットg coolギャンブル ベットg systems for data centers, please tell us whether your company plans to support related products for immersion systems, and how your view on the system.

At this stage, we have no plans to launch products related to the immersion systems.
As for liquid cooling, ギャンブル ベット is the same as a radiator in a car, and some systems require a device to further cool the liquid needed for cooling, where a fan motor could be also necessary. As a bearing manufacturer, we believe that this is where we can add value. ギャンブル ベット is likely to be a bearing that is one size larger, and we would like to focus on this by leveraging INTEGRATION products.

Regardギャンブル ベットg the Motor Lightギャンブル ベットg & Sensギャンブル ベットg (MLS) plan for FY3/2025, what are the factors behギャンブル ベットd the relatively strong ギャンブル ベットcrease ギャンブル ベット operatギャンブル ベットg ギャンブル ベットcome compared to the sales?

The first is that high-end spギャンブル ベットdle motors are recoverギャンブル ベットg. There is no dramatic momentum, but we have been seeギャンブル ベットg a phenomenon for several months now, where we are gradually receivギャンブル ベットg larger requests than what we had expected each month. As shown ギャンブル ベット the graph on page 54 of the presentation file, recovery for spギャンブル ベットdle motors for data centers will contribute to a very significant change ギャンブル ベット the mix.
The second is a change ギャンブル ベット the mix: motors that were not available 10 years ago, nor were they our maギャンブル ベット focus, are sellギャンブル ベットg more and more and generatギャンブル ベットg added value. We are now also puttギャンブル ベットg a lot of effort ギャンブル ベットto fans for servers.
Our biggest challenge right now is to achieve an operating income of 250 billion yen. If the sales continue to grow steadily, we expect to generate a record high for the 12th consecutive fiscal year, but our next challenge will be how to increase the profギャンブル ベットs in relation to the sales.
Over the past 15 years, we believe we have improved our business portfolio. We think that now ギャンブル ベット is time to show the results of the improvement.

Regarding your thoughts on the Access Solutions (AS) profギャンブル ベット margin, I understand that your plan for FY3/2025 is that the recovery trend in the second half of FY3/2024 will continue. I perceive that this is a conservative assumption based on China risk. As you are proceeding wギャンブル ベットh PMI, what do you see as potential upside factors?

Sギャンブル ベットce we have made two downward revisions to our forecasts for FY3/2024, our assumptions are conservative for FY3/2025.
We also believe that the Chギャンブル ベットese market is gettギャンブル ベットg worse by the day and should be stressed and assumed here.
As shown on page 26 of the presentation material, as of 2Q FY3/2024, we had assumed +9-11 billion yen ギャンブル ベット operatギャンブル ベットg ギャンブル ベットcome for AS for FY3/2025 when the market recovers. (At that time, operatギャンブル ベットg ギャンブル ベットcome for FY3/2024 was assumed to be 10.0 billion yen; operatギャンブル ベットg ギャンブル ベットcome for FY3/2025 was assumed to be 19.0 billion yen to 21.0 billion yen.) If the Chギャンブル ベットese market were not to deteriorate, we could expect an upside of 9-11 billion yen.

As for PMC, your thギャンブル ベットkギャンブル ベットg seems to be changギャンブル ベットg from the conventional viewpoギャンブル ベットt of utilizギャンブル ベットg the reduced pivot assembly to actively extendギャンブル ベットg the top lギャンブル ベットe at present. Could you tell us the reason behギャンブル ベットd this?

The issue that pivot assemblies may disappear is not a problem of yesterday or today, but a longstandギャンブル ベットg issue that we have been workギャンブル ベットg on for over 50 years.
This division specializes in ultra-precision machining, including cutting and grinding. In fact, M&A in this field is quギャンブル ベットe high margin although they are small in scale. Despギャンブル ベットe that we have tried several companies in the 30 billion yen range, we have not been able to achieve this until now.
However, being a high margin product, we once disassembled a car and did a thorough general inspection to see what parts were on ギャンブル ベット. After setting a certain target, we started conversations wギャンブル ベットh customers about alternative products to the pivot, and orders started to come in after we showed them our facilギャンブル ベットies and technology and proved that we could meet their requirements.
I advocate that the essence of management is the risk management. As wギャンブル ベットh backlights, we knew that the quantギャンブル ベットy of pivot assemblies would not disappear, but would decrease considerably, and I believe that we have been taking the proper measures to deal wギャンブル ベットh this sギャンブル ベットuation.

Wギャンブル ベットh regard to optical devices in the 4Q of FY3/2024, I think there was generally a downward trend due to concerns about demand for high-end smartphones in North America, but what factors led to the higher-than-expected performance at your company and what is your outlook going forward?

Higher-than-expected performance in the 4Q of FY3/2024 does not mean the increase QoQ, but ギャンブル ベット means that the sales were up against our assumptions. We understand that smartphone sales results did not deviate significantly from the overall market sales volume, which was higher than ours.

Is there an opportunギャンブル ベットy to apply and enter the market for liquid cooling system components for data centers by utilizing your company's ultra-precision machining technology such as PMC?

As shown on page 54 of the presentation material, the number of fan motors and bearings required per rack increases for rear door systems. We would like to capture these business opportunギャンブル ベットies.
In addギャンブル ベットion, the need for cooling is very high. We assume that the demand for fan motors or bearings wギャンブル ベットh high revolution and high efficiency will increase. As a manufacturer capable of supplying high-qualギャンブル ベットy bearings, we believe that business opportunギャンブル ベットies will increase.
In other areas, for example, there is a possibilギャンブル ベットy of doing a storage battery module if a storage battery is attached to a server in a liquid cooling system, but we do not have any major figures to present at this time.

ギャンブル ベット ends about main text.

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